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petitioner was reacting to extreme economic distress.
Petitioner was on the verge of bankruptcy caused by an
agricultural recession and large debt. To remain in
business, petitioner needed to reduce its interest expense.
Petitioner’s primary creditor, the Wichita Bank, required
that it sell assets to reduce its debt load. Petitioner
sold its Terra stock because it was the only asset that
could be sold quickly to raise substantial cash but it
structured the sale to retain a call on the crude oil
produced by Terra.
We cannot find that this transaction merely enhanced
the overall profitability of the cooperative and was merely
incidental to petitioner’s cooperative operation. In our
view, the sale of Terra was necessary for petitioner’s
continued operation, and, thus, it was directly related
to petitioner’s cooperative enterprise and actually
facilitated the accomplishment of those activities.
Disposition of Stock of Seaway and Mex-Am
We also find that the losses petitioner realized on
the disposition of its capital stock in Seaway and Mex-Am
constitute patronage losses. As with Terra, respondent
mischaracterizes the business relationship between
petitioner and both Seaway and Mex-Am. Petitioner acquired
its interests in Seaway and Mex-Am in an effort to
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